SA motor dealers showing tenacity in falling market

19 Oct 2016

South African motor franchise dealers continue to exhibit tenacity as they keep their businesses profitable even in these tough economic times, which have seen the dealer segment overall new vehicle market fall by more than 10% in the first half of the year.

Warren Olsen, CEO of Sewells MSXI sub-Saharan Africa.

However, the monthly analysis of a large percentage of local dealers by Sewells MSXI has revealed that their benchmark dealers (the top 30% of the dealers) are maintaining their gross profits (up 0.69%) in the first half of 2016, compared to 2015. Slightly improved margins on new and used vehicle sales are the main contributors.

The median (top 50% of the dealers) are in a similar position with year-to-date gross profit for the first six months of the year up very slightly by 0.83%. Overall profit before tax (PBT) is up for both the benchmark and median groupings, with new and used vehicle sales the main contributors. There is also positive growth in the important overall return on operational assets (ROOA), with the benchmark dealers showing an increase of 12% and the median grouping up by 6%.

“We are very happy with the way in which the dealers we assist with managing the financial side of their businesses are faring in these tough economic times,” said Warren Olsen, the CEO of Sewells MSXI sub-Saharan Africa. “These results show how well these dealers are managing the combination of new and used vehicle sales, parts and service sales as well as income from finance and insurance to keep their businesses on a solid footing.”

Heavy vehicle success

The analysis of data by Sewells MSXI, the local subsidiary of the global consulting and outsourcing firm that concentrates on the retail motor industry, also brings out some interesting facts about the way new vehicle sales have fared in the various sectors of the local market from 2013 to the first half of 2016.

For instance, the segment which has shown the largest growth of 36% is large buses, with heavy trucks (up by 7%) the only other sector which has shown volume growth in this period. All the other sectors – cars, LCVs, medium commercials and extra-heavy trucks – show declines in sales volume, with the overall market down 10%.